Avoiding the end of the world

Here’s something that I have been considering recently, given the current economic climate and increased risk of supplier failure. You outsource a key process that is critical to your business – how do you guard against the implications of that supplier becoming insolvent? Michael Stipe may have felt fine, but you may think differently if you are subject to MiFID and SYSC 8.

Traditionally, contracts include things such as escrow arrangements for software, a right to receive exit and termination assistance, and obligations to maintain procedures manuals. But these may be of little use if the supplier goes bust and the supplier (or adminstrator) switches the service off with little or no warning. An administrator may refuse to comply with an obligation to provide termination assistance or sell assets, and it may be days, weeks or even months before you get the software out of escrow and installed on your newly purchased kit. That might be too late to stop your customers from leaving.

With a bit of (legal and technical) thought, there are other things that can be done that allow you to help you get the service restored sooner. Whilst there will undoubtedly be a cost attached to this, that additional money might just be worth it to mitigate the effects of that catastrophic event.


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July 2009
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